Collaborating for competitive advantage:
SMEs and the Supply Chain
Achieving better SME
involvement in Partnering
Michael Thompson
The TEAM FOCUS Group
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Integration of Project Teams and
Supply Chains
Project Manager
Client
Suppliers
Contractor
Specialist
Contractors
Designer
Framework
Suppliers
Updated Traditional
Nom. Subcontractors
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Integration of Project Teams and
Supply Chains
Project Manager
Client
Suppliers
Contractor
Specialist
Contractors
Designer
Designer
Design & Build
3
Integration of Project Teams and
Sometimes
Supply Chains
supply chains in
their own right
Project Manager
Client
Suppliers
Contractor
Specialist
Contractors
Designer
Designer
Fully Integrated
Early Contractor Involvement for better results!
4
Accelerating Change
• Targets:
– By the end of 2004, 20% of construction
projects by value should be undertaken by
integrated teams and supply chains
– By the end of 2007, these figures should rise
to 50%
Sir John Egan
Strategic Forum
for Construction
• We are nowhere near achieving these
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Personal Intro to Partnering
•
First experience of Partnering was
in 1995 as Project Manager for 1st
water industry Partnering Scheme
in the UK, at Pennington in
Hampshire
– This was a year after Sir Michael
Latham’s report on “Constructing
the Team”.
•
•
Pennington did not include within
the partnership, any suppliers or
specialist contractors – these were
all appointed through traditional
bidding methods, although all
appointments were ratified by the
team as a whole
Pennington had a fully Integrated
Project Team
– There were no “boundaries”
between Client, Project Manager,
Designer and Contractor
•
All worked towards the same goals
as part of the same team. It was
very successful, but ….
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Early SME involvement
• In 1997, helped a major UK contractor to
run a series of workshops introducing
Partnering to SMEs
– 50 SMEs in the North East
– 48 SMEs in the South West
• All attended to find out what it was about
– But money seemed to be high on their agendas
• When will we get paid?
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Typical Protocol Contractor / SME in
1997
•
Sales & Marketing
– Share sales leads
– Develop client relationships as a
team
– Sell the ‘Partnering’ ethos
•
Review tender documents
Consult with Specialists
Identify and agree strategy
Specialist innovative ideas
confidential (one to one)
Stage 2 Bid
– Select Specialists as early as
possible
– Meet to discuss strategy,
alternatives / innovations, risk,
opportunities, programme and
duplications
– Produce method statements
– Check market and review
unsolicited quotes
Bid Submission
– Agree price
– Commit to selected Specialists
•
Follow up
– Commitment to advise of
developments
– Early warning of success or failure
Stage 1 Bid
–
–
–
–
•
•
•
Contract Award
– Early strategy meeting (team
selection / team building)
– Agreement of programming
– Placing of orders
– Agree site protocol
– PAY SPECIALISTS AS AGREED!
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What happened in Practice
• The involvement of so many specialists in
workshops to introduce them to Partnering
was probably a mistake, although it
developed an awareness of Partnering:
– Expectations were raised of special
relationships with the contractor for all
– These could not all be realised, and
relationships were damaged for some
This highlights the care that needs to be taken in selecting SME partners
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What happened in Practice
• Specialist contractors who were asked to bid with
the Contractor did not really believe that they
would be treated differently to the old ways:
– They tended to assume that any quote made would be
beaten down by the Contractor, rather than put in a
competitive but benchmarked quote
– The Contractor took them on trust, did not beat prices
down, but bids were not competitive enough to win the
work
• A review was necessary
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Nominated Sub-contractors
• Many clients specify nominated sub-contractors in
their documents so as to obtain the plant /
equipment of their choice (for consistency of kit,
or to meet preferences), or to achieve tight
deadlines
• This is not compatible with the Integrated Supply
Chain approach and can prevent partnering until,
possibly, after the sub-contractor has been taken
on by the contractor
Contractors taking on Nominated Subcontractors are
not necessarily taking on Subcontractors of their choice
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– trust between them may not prevail
Early Contractor Involvement
• Early Contractor Involvement (including
Suppliers and Sub-contractors) would
reduce the need for Nominated Subcontractors and would make a fully
Integrated Approach easier to achieve
But what do we do about Framework Suppliers?
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Framework Suppliers
• Client assessments to create Frameworks are often based
on the most competitive “Whole Life Cost” with little
consideration to expertise or ability of competing
organisations to provide cost effective solutions
• Whereas Framework Suppliers provide a relationship with
the Client, they may not always sit comfortably with Main
Contractors
• Some suppliers are finding that they have to sign the
same full Sub-contract agreements for equipment as little
as £4000 in value, that they would sign for equipment
worth £250,000 or more!
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Where are we now?
• Some national Contractors do have Integrated
Supply Chains
– Some call them their “Premier League”, with trust
strengthening between them as they repeat and build
on good experiences
– This is happening between Contractors and SMEs
such as:
• Designers and architects
• Suppliers (concrete, hardtop, building materials etc.)
• Specialist contractors (earthworks etc.)
– It is not perfect but is getting better with time
– It is achieving better relationships as a result of working
together and knowing each other better
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Where are we now?
• There are initiatives such as:
– The “System Provider” approach which is a
name given to any organisation that is licensed
to assemble and market a construction solution
under the COMPASSure Risk Management
Scheme (starts in September 2004)
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Where are we now?
• But, the reality is:
– It is believed that only about 30% of the
Construction Industry is practising Partnering in
some shape or form.
– Instances of full Integrated Project Teams are
probably far less than this – possibly less than
10%
– It is believed that Integrated Supply Chains
exist in less than 5 or 6% of all Construction
Industry Projects
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Where do we go from here?
One approach is use of the
Strategic Forum for
Construction’s Integration
Toolkit
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In line with Sir John Egan’s Accelerating Change (2002) recommendations
Where do we go from here?
• Small and Medium-sized Enterprises make up the
bulk of the construction industry
• But with the advent of framework contracts, there
is a growing fear amongst small players that
business opportunities for SMEs will diminish
rapidly
• In fact SMEs do have advantages such as being
better equipped to work in a collaborative way,
because of their potential faster uptake, greater
commitment and more innovative approach.
Source: Strategic Forum for Construction – SME Integration
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What are the rewards?
• There are benefits from being part of an
Integrated Supply Chain:
– Improved profitability (less risk)
– Greater continuity of work
– More stable operating environment
• Working in partnerships:
– Earlier involvement
– Motivational and continuous improvement benefits
Source: Strategic Forum for Construction – SME Integration
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Commitment to Partnering
• It requires a fundamental change to attitude
• ‘Them and us’ attitudes need to be eliminated and
replaced with an atmosphere of mutual trust and
common purpose.
• It requires commitment to working in a way that is
well proven, if done with enthusiasm, in the
knowledge of the benefits that will be received as
a result.
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Integrating Supply Chains
So if we are not
already doing so, let
us give it a go!
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